The New Republic

The New Republic

The Worst Case

How health care reform really could get repealed—and why the repercussions would go well beyond health care.

Author’s note: Oral arguments are finally over. By the end of this term, we’ll know whether the Supreme Court thinks the Affordable Care Act is constitutional—and, if not, which parts (if any) may survive. But what about the underlying legal theory? What about the claims, made by the health law's critics, that it's an unprecedented and unjustified violation of individual liberty? In late 2010, as these lawsuits were first moving through the courts, I decided to investigate that question, as both a policy and constitutional proposition. Here’s what I found:

Steven Hyder, 40, runs his own legal practice out of a shared office in downtown Monroe, Michigan, a blue-collar town south of Detroit. Mostly he handles relatively routine, low-profile work: bankruptcies, personal injury claims, that sort of thing. But recently, he became part of a much bigger case. He’s a named plaintiff in a lawsuit challenging the constitutionality of the Patient Protection and Affordable Care Act. The focus of Hyder’s suit, which was organized and written by a conservative legal organization, is the “individual mandate”—the requirement that everybody obtain health insurance or pay a fee to the government. The case is one of several moving through the federal judiciary. Sometime in the next few years, at least one of them is likely to end up before the Supreme Court.

A few weeks ago, I spoke with Hyder at his office, in order to learn more about why he had brought this case. He said his motive was straightforward. He’s opted not to carry health insurance because he doesn’t think the benefits justify the price, and he doesn’t want the government forcing him to do otherwise. Okay, I asked, but what if he gets sick and needs hospitalization? How will he afford those bills? It was a distinct possibility, he agreed, patting his waist and noting that he was a little overweight. But those potential bills would be problems for him and his hospital, he suggested, not society as a whole.

When I told him that I disagreed—that his decision to forgo health insurance meant other people would be paying his bills, via higher taxes and insurance premiums—he politely and respectfully took issue with my analysis. The discussion went back and forth for a while, but soon it became apparent that our differences went beyond the finer points of health care policy, to our most basic understanding of the rights and obligations of citizenship. “It’s a complete intrusion into my business and into my private life,” he told me. “I think it’s one big step towards a socialist society and I’m purely capitalist. I believe in supply-side economics and freedom.”

If those sentiments sound familiar, it’s because you’ve heard them a lot lately. They’re the rallying cries of the Tea Party movement and, more generally, of conservatives convinced the government has gotten out of control. So far, it’s proven more effective as a campaign slogan than a governing strategy. This week’s congressional vote on health care repeal is purely symbolic because Democrats hold the Senate and President Obama holds a veto. And even if Republicans do recapture the Senate and the White House in two years, they will likely think twice before repealing the program: While public opinion on the Affordable Care Act as a whole is divided, people remain wildly enthusiastic about its benefits.

But judges don’t operate within the same constraints as politicians. And this is where the health-care repeal litigation is fundamentally more threatening than attempts to repeal the law through Congress. Experts I’ve interviewed aren’t by any means convinced that the repeal lawsuits will succeed, but they also are not dismissing them out of hand. It’s easy to see why. Conservatives have spent decades populating the federal bench with judges who, although hardly monochromatic, share a suspicion of government intrusions into the economy. One such judge has already ruled the Affordable Care Act unconstitutional; another is likely to do so sometime this month, maybe even this week. Although these judges would still represent a minority viewpoint, given that a dozen other federal judges have so far dismissed similar lawsuits or declared the Affordable Care Act constitutional, the votes that count are on the Supreme Court, where conservatives appointed by Republicans hold a 5-4 majority.

Smart legal minds, moreover, can always find plausible precedents or nuances to validate their point of view. And that is exactly what the lawyers making the case for health care repeal have done. The legal debate surrounding repeal is complicated and multi-dimensional. But part of it revolves around a novel philosophical twist: a distinction between activity and inactivity that, repeal advocates say, makes the insurance requirement an illegitimate exercise of federal authority. It’s an arcane legal point, but, suddenly, a consequential one, and not just because of its relevance to health care. Some experts believe that a ruling striking down part of the Affordable Care Act could render vulnerable wide swaths of the regulatory state, breathing new life into a notion of limited government this country rejected a very long time ago.

IN 1895, THE state of New York passed a law prohibiting bakery employees from working more than 60 hours per week. At the time, long hours were forcing them to live and sleep in their tiny workplaces, jeopardizing both their health and that of customers. But Joseph Lochner, a New York bakery owner, didn’t like the interference. When an employee filed a complaint about hours exceeding the maximum, and the state slapped Lochner with a $50 fine, he appealed the conviction with a lawsuit claiming the law was unconstitutional.

A few years later, in Lochner v. New York, a 5-4 majority on the Supreme Court held that New York state had indeed overreached—that government had no authority to exercise such “police power” over what was, after all, private economic activity. In the three decades that followed, the Lochner Court, as it became known, would continue to strike down key pieces of Progressive era legislation and, eventually, the New Deal. In some cases, including Lochner, the Court cited a supposedly sacrosanct right to private economic decision-making, free from interference by the states or the federal government. In others, the Court relied on a narrow interpretation of Washington’s authority to regulate interstate commerce, effectively limiting it to the management of trade that literally crossed state lines.

Underlying both arguments was a claim that the Framers of the Constitution never envisioned the sort of extensive government intrusions into the economy reformers of the early twentieth century had in mind. And that claim may have been true. But that was in large part because the writers of a constitution ratified in 1787 had no idea what the country would be like in 1897. In fact, the economy had undergone a dramatic, fundamental change in the late nineteenth century—shifting from agriculture to industry and from rural to urban. These changes had concentrated power in large corporations, widened inequality, and created a large class of laborers with precious little ability to provide for their own economic security. The progressive laws of that era were designed to remedy those ills by, among other things, guaranteeing safe workplaces, setting minimum wages, and creating mandatory government-funded pensions for old age.

The conflict between judicial literalism and economic reality finally came to a head during the Great Depression and Franklin Roosevelt’s presidency. And, under increasing political pressure, the Court did an about-face—issuing a series of rulings puncturing Lochner’s veneration of private economic rights and justifying vast powers for the federal government. The bases for these new powers, according to the Court, were expansive understandings of constitutional clauses authorizing Congress to regulate interstate commerce and to levy taxes so that it could provide for the general welfare. In one of the most critical and influential decisions of that era, Wickard v. Filburn, the Court in 1941 ruled that the federal government could prohibit a farmer in Ohio from growing surplus wheat, even if it was purely for his own family’s consumption. The worry wasn’t so much the behavior of that one farmer, Roscoe Filburn, but the possibility that many more farmers would do the same thing, affecting the price of wheat and such products as cereal or grain-fed beef that depended upon it.

Health care reform reflects the same impulse as the economic reforms of yesteryear. Just as private markets in banking, investments, and agriculture all failed in the 1930s, threatening to drag down the economy, so too the private market for health care has failed, leaving millions of Americans unable to get essential medical treatment while saddling individuals, businesses, and taxpayers with increasingly unsustainable financial burdens.

But health care reform isn’t just defensible on policy grounds, say its supporters. It is also defensible on constitutional grounds—starting with the power to tax, the same authority that undergirds Social Security and its health insurance analogue, Medicare. With Medicare, the government demands that people help finance the cost of society’s medical treatment through payroll taxes. With the Affordable Care Act, the government demands that people help finance the cost of society’s medical treatment either by paying for a reasonably comprehensive insurance policy or writing a check to the government. The form of the payments is different but, argue the act’s defenders, the basic concept is the same. “A good analogy,” Yale professor Jack Balkin wrote recently in the New England Journal of Medicine, “would be a tax on polluters who fail to install pollution control equipment: They can pay the tax or install the equipment.”

The second source of authority for the Affordable Care Act, according to its defenders, comes from the power to regulate interstate commerce and take steps “necessary and proper” for exercising that power. The “interstate” part is the most straightforward. Health care represents 17 percent of the national economy. And inside this growing sector are interlocking pieces that affect one another, frequently across state lines. Large companies that “self-insure”—i.e., most large companies—run plans that affect employees in multiple states. Doctors and hospitals are constantly dealing with both vendors and insurers from elsewhere in the country and, in some cases, the world. And those are just two examples.

What makes the mandate “necessary and proper,” the government and its allies say, is the way that individual decisions about whether to buy insurance ultimately affect prices throughout the nation’s health care system. That’s partly because of the problem I posed to Steven Hyder during our interview: When doctors and hospitals give uncompensated care to people without insurance, these providers of care pass along higher prices to everybody else who pays, and those higher prices show up as either larger taxes, larger insurance premiums, or larger out-of-pocket expenses. In addition, if people know they can get insurance even if they have pre-existing conditions, some will wait until getting sick before buying insurance. That upsets the delicate actuarial balance of insurance plans, which depend on premiums from healthy people to offset the costs of the sick. Premiums end up rising even more.

Researchers at the nonpartisan Urban Institute, which has developed its own mathematical model of the health care market, have run simulations on how the Affordable Care Act would play out without the individual mandate. They found that an additional 18 million people would end up without insurance. Jonathan Gruber, an MIT economist and respected authority in his own right, determined that without a mandate, premiums for people buying coverage on their own would be 27 percent higher. Gruber has advised health care reformers, including the architects of the Affordable Care Act. But the nonpartisan Congressional Budget Office got similar results from its calculations. And while economic models can certainly be wrong, these results are consistent with real-world experience: In those states where laws already require insurers to sell to anybody but insurance enrollment is not compulsory, premiums have gone way up.

The presence of uninsured Americans influences prices throughout the health care system in more subtle ways, as well. Experts have developed and begun to implement many promising ideas for reducing the overall cost of medical care, so that it imposes a lesser burden not just on individuals but also on businesses and government budgets. Among them are initiatives to provide more preventative care; to foster steady, more cooperative relationships between patients and their medical professionals; to avoid duplicative or unnecessary treatments, as well as medical errors. None of these are as effective when people are constantly moving in and out of insurance coverage.

IT WAS NOT long ago that many conservatives agreed. In 2006, Mitt Romney, then the governor of Massachusetts, argued that an individual mandate was a necessary part of the state health care reforms he eventually signed into law. “Otherwise,” Romney explained to National Public Radio, “you’re just passing your expenses onto someone else.” As recently as the summer of 2009, when the debate over Obama’s health care bill was well underway, prominent Republicans like Senator Charles Grassley were making the case that a mandate was proper, too. “There isn’t anything wrong with it, except some people look at it as an infringement upon individual freedom,” he told Fox News. “But when it comes to states requiring it for automobile insurance, the principle then ought to lie the same way for health insurance, because everybody has some health insurance costs, and if you aren’t insured, there’s no free lunch. … I believe that there is a bipartisan consensus to have individual mandates.”

The abrupt change in opinion among Republican politicians, like Grassley and Romney, smacks of political opportunism. But, within legal circles, there is a group of conservative thinkers who have been arguing against such government interventions for quite some time. They believe that the Supreme Court made a monumental error when it turned to a more expansive reading of the Commerce Clause in the 1930s. (My colleague Jeffrey Rosen wrote the definitive article about these thinkers back in 2005.) Known sometimes as proponents of the “Constitution in Exile,” they favor a return to the Lochner Court’s reading of the Constitution—or, at least, something approximating it. “Opponents [of the individual mandate] certainly aren’t about to cite Lochner,” writes Gordon Silverstein, a political scientist from the University of California-Berkeley and the author of Law’s Allure. “But it is precisely that issue—an individual’s right to economic liberty—which is driving the emotional appeal of the attack on health care reform for many conservatives.”

The first serious, public argument for a repeal lawsuit seems to have come in the summer of 2009, when conservative lawyers David Rivkin and Lee Casey wrote an op-ed for TheWall Street Journal titled “Mandatory Insurance is Unconstitutional.” That article and some other early efforts at the argument betrayed simple, fundamental misconceptions about the nature of health insurance. In the Journal op-ed, for example, Rivkin and Casey argued that uninsured people end up subsidizing the insured because they pay higher prices for their services. That’s not true. Hospitals do frequently charge the uninsured more, because uninsured people don’t benefit from group discounts that insurers negotiate on behalf of beneficiaries. But hospitals are rarely able to collect on those bills, and the best available estimates suggest that, overall, care for the uninsured may generate as much as $60 billion a year in uncompensated care, most of which the providers of care end up passing along to the insured and to taxpayers.

Still, legal critics of the individual mandate eventually focused on two other arguments. The first concerned taxes. The government has the right to levy taxes, these lawyers acknowledge. But the mandate scheme is not a tax, they go on to say, in part because the architects of health care reform did not consistently call the individual mandate a tax. That would mean the government has to justify the mandate as an effort to regulate interstate commerce. And that rationale, according to the act’s critics, is even weaker.

The key issue here is the meaning of a single word: “activity.” In this reading, all of the past rulings on the Commerce Clause, even those acknowledging its broad reach, refer to the government’s authority to regulate activity. But neither the Constitution nor the judges who have interpreted it ever suggested the government had the right to regulate non-activity—which is a fair description, according to these lawsuits, of a decision not to obtain health insurance. Like many good constitutional arguments, the argument can be put a lot more simply: If the government can penalize you for not buying insurance, can it also penalize you for not buying a television or a GM car? John Yoo, the conservative Berkeley law professor who served in the administration of George W. Bush, makes the argument this way: “The court has never upheld a federal law that punishes Americans for exercising their God-given right to do absolutely nothing. Even the furthest reaches of the Commerce Clause have extended only to affirmative actions, such as growing wheat or possessing illegal drugs. The only counterexamples that come to mind are the draft and jury duty, and those arise from other constitutional duties than Congress’ power over interstate commerce.”

IT WON’T SURPRISE anyone to know that I find both of the critics’ arguments unpersuasive. The challenge to the taxing power founders in several places, starting with the simple fact that a law’s rhetoric shouldn’t matter as much as its substance. If it’s a tax, who cares what Obama and the Democrats called it? Not the courts, it would seem: In a 1941 decision on “the constitutionality of a tax law,” the Supreme Court ruled that it was “concerned only with its practical operation, not its definition or the precise form of descriptive words which may be applied to it.” In a 1993 case, a Federal Circuit Court invoked similar logic, describing a tax as an “involuntary pecuniary burden” that supports government operations, “regardless of name.”

The primary conservative Commerce Clause argument—the attempt to draw a distinction between activity and non-activity—is a bit more complicated, but no less flawed. Everybody will, at some point, need some form of medical care. And virtually everybody will, at some point, face medical bills far in excess of their ability to pay out of pocket or with savings. Every one of these people is engaging in a form of activity: choosing how to pay his or her medical bills. Regulating that active choice seems firmly within the contemporary understanding of the Commerce Clause’s reach. (The obvious exception is people who, because of faith, reject modern medicine; they are exempt from the individual mandate.)

But still, once the government forces people to buy a private product, can’t it force people to buy anything—even the proverbial GM car, as so many critics have suggested? Hardly. Cars, after all, are not like health care. Not everybody will need one. If the converse were true—in other words, if everybody did need a car—then the government clearly could require everybody to pay what they could for a GM car or, at least, pay what they could for a car that met government standards. (The latter is a closer analogy to the way the Affordable Care Act works.)

What’s more, the Affordable Care Act doesn’t actually require that everybody get insurance. It merely requires that everybody who is both financially capable and likely to use medical care make a financial contribution toward the cost, while leaving these people choices about what form that contribution takes. As lawyer and journalist Garrett Epps recently explained for The Atlantic, “There will remain a small but significant number of Americans who can afford health care insurance but choose not to buy it. … If they wish to keep their uninsured status, they may do so by paying an addition to their income tax bills—ranging from as little as $695 for an individual taxpayer to $2085 for a family of six or more. The claim that the government is ‘forcing individuals to buy a commercial product’ is worse than spin; it is simply false.”

ONE STRONG ENDORSEMENT of a broad Commerce Clause interpretation came relatively recently, via a 2005 case involving the government’s ability to regulate and, in this case, prohibit home cultivation of marijuana. In a concurring decision, one justice wrote that “Congress may regulate even noneconomic local activity if that regulation is a necessary part of a more general regulation of interstate commerce.” Of specific concern, the justice wrote, was the need to regulate noneconomic activity that might “undercut” broader, clearly constitutional regulations.

What makes the statement so important is the source: Antonin Scalia, anchor of the Court’s conservative wing. To be sure, non-economic activity is not the same as economic non-activity, but the ruling does suggest that Scalia is open to a broad reading of the Commerce Clause. And plenty of smart Court watchers I interviewed think it possible that Scalia, Anthony Kennedy, John Roberts, and maybe even Samuel Alito will vote to uphold the law for one reason or another. Among other things, they noted, Supreme Court justices are always conscious of their limited political capital: They have only so much ability to strike down laws before they endanger their legitimacy. And decisions that break down along clear partisan lines, as a decision to invalidate the individual mandate likely would, are the most dangerous of all.

That’s the case for optimism. If you’re a pessimist by nature, you can find worrying signs in two decisions from the Rehnquist Court—one about gun control and one about domestic violence—in which majorities defined some limits on the Commerce Clause, something that the Court had not done since the Lochner era. You could point to the fact that the Roberts Court recently struck down another major act of Congress, invalidating limits on campaign spending in the Citizens United case. You could even look back to November and December of 2000, during the controversy over miscounted ballots in Florida, when many legal experts thought the Court would never risk its reputation by intervening in what had traditionally been a state matter. While justices are certainly conscious of the damage that brazen interventions can do to the Court’s reputation, that hasn’t always been enough to hold them back. “It’s amazing how far out on a limb the [Lochner] Court had to go before a public backlash got justices to think again,” says Jeff Shesol, whose book Supreme Power chronicles FDR’s fight with Court. “It took years between when the battle started and when the rulings finally changed.”

WHAT WOULD AN unfavorable ruling mean for the future of health care in the United States? The best case scenario, at least for those of us who support the Affordable Care Act, is that the government finds another way to impose the mandate or enact a modification that achieves close to the same ends. Paul Starr, a Princeton sociologist who helped write the Clinton health care plan during the 1990s, has suggested the federal government create an “opt-out” scheme in which people could forgo insurance without penalty—but only by losing their access to government-guaranteed insurance for five years. This would prevent people from buying insurance only after they got sick. And if the federal government didn’t act, perhaps the states could.

But it’s unclear how well such measures would work. And any solution would require the enactment of new legislation, something that might be difficult in the political aftermath of an unfavorable Supreme Court decision. In the absence of remedial action, the Affordable Care Act could falter, the regulatory and financing apparatus coming apart as premiums rose and insurers chafed under requirements they could not realistically meet. It’s easy to imagine a scenario where, rather than deal with the mess, a chastened Congress throws up its hands and decides just to repeal, or at least severely claw back, the entire universal coverage plan.

On the left, some have wondered whether this might finally create a groundswell for single-payer–style health insurance—which, like Medicare, would clearly fall under the government’s taxing power and therefore be constitutionally invulnerable. That’s possible. But it’s just as possible that the country would simply give up on universal health care, at least for now, effectively deciding that guaranteeing affordable access to medical care was something the United States, alone among developed countries, could not do. At least one prominent legal thinker on the right, the University of Chicago’s Richard Epstein, has suggested that would be just fine: In Mortal Peril, he argues that the idea of health care as some sort of basic right is misguided—and that, at the end of the day, government has no business even demanding that doctors and hospitals provide life-saving treatment, as federal law has long required them to do in most situations.

Still, it was not the effect on health care policy that most worried liberal legal experts I interviewed. It was the effect on the rest of the regulatory state. These experts agreed that a decision to overturn the mandate would be narrow—that the Roberts Court would largely affirm the long reach of the Commerce Clause, just as the Rehnquist Court did with its decisions on gun control and domestic violence. And that would be consistent with the rhetoric of prominent advocates of repeal, like Randy Barnett at Georgetown Law School, who say that repealing the Affordable Care Act needn’t channel the spirit of Lochner and completely revise decades of jurisprudence.

But many experts argue, plausibly in my view, that simply recognizing a difference between activity and non-activity would be a bold act of revisionism, because neither the Constitution nor the judicial record currently makes that distinction. And it could have far-reaching implications. “If not buying health care is inactivity, why isn’t not buying the safety equipment for your factory that OSHA requires?” asks University of Chicago Professor Aziz Huq. “Why is it that when a shopkeeper is inactive in the sense of not opening his door to, say, African Americans, Jews, or Muslims, he can be hauled into court under the Civil Rights Act? Lawyers are pretty creative. At the very least I think we would see a lot of new arguments about established laws like OSHA and the Civil Rights Act being challenged. Sure, the Court could reject those arguments. But would it?”

Of course, to issue such rulings would be to resurrect ideas the courts, and the country, have not embraced for nearly a century. It would amount to making a statement that the constitution was designed not to adapt but to preserve a vision of America rooted in the distant past, when the proverbial yeoman farmer could hardly imagine the existence of super-antibiotics or the MRI machine—to say nothing of the huge sums of money patients and insurers would pay for the use of them. It would not constitute a full return to the Lochner era, but it would be a step in that direction—a step that potentially goes well beyond health care. People such as Steven Hyder might welcome that outcome. But would the rest of us?